Hewlett Packard Enterprise (NASDAQ: HPE) acquired global-leading computing company Silicon Graphics, Inc. (NASDAQ: SGI) in a deal worth $275 million.
In a statement on August 11, HPE announced it had signed a definitive agreement with SGI for compute, data analytics and data management. The deal will strengthen HPE’s position in the $11 billion high-performance computing (HPC) segment and the data analytics segment.
HPE and SGI to complement each other
The transaction is expected for completion in the first quarter of HPE’s fiscal year 2017 (i.e. between November 2016 and the end of January 2017) following regulatory approvals and other final details. SGI has approximately 1,100 employees worldwide and had revenues of $533 million in 2016.
Both Antonio Neri, HPE executive vice president and general manager, and SGI CEO Jorge Titinger said in the statement that SGI’s data and HPC tech would complement HPE’s proven data center solutions and in turn, HPE will empower SGI data-driven organization.
Plus, SGI’s portfolio will extend and reinforce HPE’s leading position in the server market, while providing customers with larger supercomputer installations for handling the explosion of data. The private and public sector, as well as US federal agencies and companies, will benefit from the acquisition.
Jointly, the tech enterprises will offer high-end computing systems for advanced weather, genomics, and life sciences research, and to enhance cyber defenses at corporations of all kind over the world.
#HewlettPackard Enterprise is buying a long-time rival with a declining business | #MnA https://t.co/PgRlS3YpmI @bi_enterprise
— Timo Nurminiemi (@TimoNurminiemi) August 13, 2016
After being longtime competitors
Shares of SGI immediately went up nearly 30% after its agreement to be acquired by HPE. The latter will pay $275 million, or $7.75 a share, for longtime Silicon Valley competitor SGI, in financial trouble ever since the last great recession kicked in 2008.
In its most recent earnings report, SGI announced a break even profit per share and a revenue decline of 20% to $123 million. CEO Jorge Titinger said that its 30+ year legacy of innovation would complement HPE’s leadership.
#HewlettPackard Acquires Silicon #Graphics as Data-Center Battle Heats Up ➜ https://t.co/ZrfG2wUW5L pic.twitter.com/gznWiBB2jh
— Bidness Etc (@Bidnessetc) August 12, 2016
However, it seems the deal was carried through to secure that legacy as well. SGI filed for bankruptcy in 2009 and hadn’t been profitable since 2013. The deal also marks HPE’s latest move to narrow its focus for business growth. In 2015, HPE split from HP Inc., which now runs the PC and printer area.
HPE retained hardware, software, and services. Last May, HPE’s Enterprise Services division merged with tech giant Computer Sciences Corporation (CSC) to create a new IT services company.